An example of E-commerce failure and its causes

Many startup and beginning merchants sometimes wonder what some of the most common reasons are that eCommerce retailers may fail in their attempts to successfully launch and grow an Online retail business.

Why is it that some succeed where others have failed?

I would like to explain why the failure and its causes of E-commerce with the example of Flooz.com.

Flooz.com was a venture based in New York City that went online in February 1999. Their plan was to introduce a currency unique to the Internet, somewhat similar in concept to airline frequent flier miles or even the old grocery store stamp books. As Internet users accumulated "flooz" credits, often given as a promotional bonus along with an online purchase or else purchased directly to create a kind of Internet gift card, they could later be redeemed for real merchandise at a variety of participating online merchants.

What cause it failure?

The reason is the lack of security protect over their system over the internet.
The officially ceased operations of Flooz.com is over the weekend. It fell victim to a softening economy and a sour investment atmosphere. Internet fraud may have sped its demise.

The company had unknowingly sold $300,000 of its currency, known as flooz, over the last three months to a ring of credit card thieves in Russia and the Philippines, before being alerted by the F.B.I.

Stolen credit card numbers were used online to buy the flooz currency, which, until recently, could be used as gift certificates at about 30 retail Web sites, including those of J. Crew, Barnes & Noble and Tower Records. Flooz.com's credit card processing company, which Flooz.com executives would not identify, also alerted the company about the fraud, after the Flooz.com charges showed up on the monthly statements of people whose credit cards, or card numbers, had been stolen.

Flooz.com, which provided a currency that a credit card thief could buy and use like cash online, in some ways gave thieves greater liquidity.

Flooz.com's problems reflect the difficulty of creating a successful online currency.

Moreover, Flooz.com's troubles also reflect the fragility of credit arrangements for e-commerce businesses that lack a deep well of cash.

Flooz.com is also fail to established customer trust that should implement and practice as many ideas or features to help establish trust with customers as possible. Use security banners and trust certificates, have an active SSL certificate in place, display contact information, create clear policies, use live chat and implement a quality customer service strategy.

While TowerRecords.com, Mr. Eisenman so disappointed with Flooz.com and said that on some days last January, gift recipients redeeming flooz made up half the site's business. There will be no such Christmas in January next year. ''I had to change my holiday projections based on them not being around,'' Mr. Eisenman said. ''It'll definitely be a blow to us.''

For some merchants, the failure of Flooz.com, in particular, is a loss worth mourning.